TMI Blog2013 (6) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... ndover the assets of the company (in liquidation). Being aggrieved by this order respondent s-1 and 2 filed appeal in OSA No.19/2009 and 10/2009. Said appeal came to be disposed of by order dated 07.07.20 11 and both the appeals were allowed by accepting the p lea put forward by the appellants therein namely, that they should be afforded an opportunity before the Company Court to put forth their defence. The matter came to be remanded to the Company Court for consideration afresh. 3. Pursuant to the said order of remand, respondents-1 and 2 have filed their objections to the application. The summary of the objections raised b y first and second respondents are as under: OBJECTIONS OF FIRST RESPONDENT: 3.1) Company (in liquidation) had borrowed loan and a charge had been created over the immovable property by mortgaging the same in favour of Bank and on account of the said company (in liquidation) becoming defaulter O.A.194/1997 was filed for recovery of ₹ 71,03,955/ - with interest and other charges and said application came t o be allowed on 26.06.2000. Pursuant to the said order, recovery certificate came to be issued and the Recovery Officer of DRT attached sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of the amount by executing recovery certifica te or within the exclusive jurisdiction of Tribunal and Rec overy Officer. No other Court or authority can go into said questions relating to liability and recovery as provid ed under DRT Act. The said DRT Act is a special law which o verrides other special law and as such, leave of Company Court under Section 446(1) of Companies Act, 1956 was not necessary nor could the application be transferred to t he Company Court under Section 446(2) of the Companies A ct, 1956. 3.5) Second respondent has also without knowledge o f liquidation proceedings participated in the auction conducted by Recovery officer and is a bonafide purchaser entitled to the ownership and possession of property s old to him particularly when valid consideration has been pai d to Recovery Officer and property having been registered in the name of second respondent and also he being in actual physical possession. On these grounds amongst others , first respondent sought for dismissal of the application. OBJECTIONS OF SECOND RESPONDENT: 3.6) Apart from reiterating the contentions raised by first respondent, second respondent contends that he h as acted bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of ALLAHABAD BANK vs CANARA BANK ANOTHER reported in (2000)4 SCC 406 the examination and interpretation of Section 529-A (1)(a) was not under consideration and i t was the subject matter of consideration by Larger Bench of the Apex Court in ANDHRA BANK vs OFFICIAL LIQUIDATOR ANOTHER reported in (2005)5 SCC 75 whereunder it has been held that finding recorded in paragraph 76 of the judgment in ALLAHABAD BANK s case does not lay down the correct law and as such, he contends that the dicta l aid down in ALLAHABAD BANK s case need not be considered in view of subsequent larger Bench judgment of ANDHRA BANK s case referred to supra, whereunder it has been hel d that power under Section 446 of the Companies Act, 19 56 can only be exercised upon consideration of respectiv e contentions of the parties raised in a suit or proceedi ng or any claim made by or against company and determinatio n of priorities amongst creditors would also fall for conside ration if parties claiming the same were before the Court. He would also submit that Apex Court in the case of MAHARASHT RA STATE CO-OPERATIVE BANK LIMITED vs ASST.PROVIDENT FUND COMMISSIONER OTHERS reported in (2009) 10 SCC 123 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 2008 SC 2699- M/S BAKEMANS INDUSTRIES PVT. LTD., V/S M/S NEW CAWNPORE FLOUR MILLS ORS. 6) (2005)5 SCC 75- ANDHRA BANK V/S OFFICIAL LIQUIDATOR AND ANOTHER 7) (2009)10 SCC 123- MAHARASTHRA STATE CO- OPERTATIVE BANK LIMITED V/S ASSISTANT PROVIDENT FUND COMMISSIONER AND OTHERS 6. Percontra, Sri Nanjunda Reddy, learned Sr.Advocate appearing on behalf of secured creditor would contend that recovery proceedings and sale of property belonging to a creditor is in the domain of DRT and company Court s jurisdiction is ousted. He would contend that DRT Act is a special enactment and Section 34 would clearly indicate that except to the extent of saving clause of sub- section (2) of Section 34 the provisions of DRT Act will have an overriding effect and in view of sub-section (2) no t providing for the application of provisions of Companies Act, 1956 it would be subservient to the special enactmen t or in other words, the provisions of DRT Act will prevail ov er the Companies Act, 1956. He would elaborate his submission by contending that right to sell and right to distribution of sale proceed s being different, the application of Section 529A of Compan ies Act, 1956 which only deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 537 is not attracted and hence, sale in favour of second respondent is not void. In support of his submissions, he relies upon the following judgments: (1) (2010) 158 Company Cases 789 (Madras)- SUBHASH KATHURIA SOLE PROPERIETOR, ANITHA INTERNATIONAL V/S DEVE SUGARS LIMITED THROUGH THE OFFICIAL LIQUIDATOR, HIGH COURT AND 2 ORS. (2) AIR 2005 SC 1814- ANDHRA BANK V/S OFFICIAL LIQUIDATOR AND ANR. (3) AIR 2000 SC 1535-ALLAHABAD BANK V/S CANARA BANK AND ANOTHER 8. Having heard the learned Advocates appearing for parties and on perusal of the pleadings as well as case laws pressed into service by respective learned Advocates, I am of the considered view that following points woul d arise for my consideration: (1) Whether Debt Recovery Tribunal through its Recovery Officer under the provisions of Recovery of Debts due to Banks and Financial Institutions Act, 1993 is empowered to sell the assets of a company under liquidation at the instance of secured creditor, without leave of the Company Court or without associating the official liquidator, despite deemed paripassu charge of said assets in favour of official liquidator Under Section 529A of companies Act? (2) Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) to the Official Liquidator . 12. In order to examine the rival contentions, it would be necessary to note the list of dates chronologically with events for answering the points formulated above: Date Events 19.02.1997 Application in O.A.No.194/1997 was filed before DRT, Bangalore by R-1 Canara Bank 19.06.1999 Winding up petition in Co.P.No.167/1999 was filed against company by a creditor Col.D.B.Singh 30.03.2000 Co.P.No.167/1999 was admitted 26.06.2000 O.A.No.194/1997 was allowed by DRT 23.02.2001 Date of advertisement in Co.P.No.167/1999 27.06.2005 Attachment order by Recovery Officer 02.10.2005 Public notice of auction sale issued by Recovery Officer of DRT, to sell the immovable property. 05.10.2005 Date of auction by DRT 16.11.2005 Confirmation of sale in favour of R-2 02.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 529. APPLICATION OF INSOLVENCY RULES IN WINDING UP OF INSOLVENT COMPANIES.- (1) In the winding up of an insolvent company, the same rules shall prevail and be observed with regard to- (a) Debts provable; (b) The valuation of annuities and future and contingent liabilities; and (c) The respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent: [Provided that the security of every secured creditor shall be deemed to be subject to a paripassu charge in favour of the workmen to the extent of the workmen's portion therein, and, where a secured creditor, instead of relinquishing his security and proving his debt, opts to realise his security - (a) the liquidator shall be entitled to represent the workmen and enforce such charge; (b) any amount realised by the liquidator by way of enforcement of such charge shall be applied rateably for the discharge of workmen's dues; and (c) so much of the debt due to such secured creditor as could not be realised by him by virtue of the foregoing provisions of this proviso or the amount of the workmen& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intained by the company; (c) Workmen s portion , in relation to the security of any secured creditor of a company, means the amount which bears to the value of the security the same proportion as the amount of the workmen's dues bears to the aggregate of (i) the amount of workmen's dues ; and (ii) the amounts of the debts due to the secured creditors. 529A. OVERRIDING PREFERENTIAL PAYMENTS (1) Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company - (a) workmen's dues; and (b) Debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 paripassu with such dues, shall be paid in priority to all other debts. (2) The debts payable under clause (a) and clause (b) of sub-section (1) shall be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportion. 537. AVOIDANCE OF CERTAIN ATTACHMENTS, EXECUTIONS ETC., IN WINDING UP BY TRIBUNAL. - (1) Where any company is being wound up by Tribunal- (a) any attachment, distress or execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ride other laws: -- The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. STATE FINANCIAL CORPORATIONS ACT, 1951 SECTION 32 :- Procedure of District Judge in respect of applications under Section 31:- (10) Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub-section (1) of section 31, nothing in this section shall be construed as giving to the Financial Corporation any preference over the other creditors of the industrial concern not conferred on it by any other law. SECTION 46-B. Effect of Act on other laws :--- The provisions of this Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to and not in deroga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge in favour of the workmen to the extent of the workmen s dues. Section 529A which also came to be inserted by Act 35 of 1985 enabled the legitimate du es of the workers to rank on paripassu with secured creditors and even above the dues to the Government in the event o f winding up of a company. 1 st proviso to Section 529(1) and 529A, which were introduced by Act 35 of 1985 would ensure that a secured creditor who intends to realisehis security by remaining outside the winding up will have to act in association with the Official Liquidator who represent the workman while selling the assets of the Company (in liquidation). The status of the secured creditor is conferred on the workman by operation of law i.e., by virtue of Section 529, 529A and 530 conferring substantial rights and benefits on the workmen of a closed undertaking and such workmen would get pari-passu charge over the assets of t he Company (in liquidation) along with the secured credi tors. Perusal of Section 537 would indicate that if any attachment, distress or execution is put in force with out leave of the Company Court against the estate or effe cts of the Company (in liquidation) after commencement of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various proceedings by the Banks and financial institutions under the RDB Act, leave of the Company Court is necessary under Sections 537 before a winding up order is passed against the Company or before provisional liquidator is appointed under section 446(1) and whether the Company Court can pass orders of stay of proceedings before the Tribunal, in exercise of powers under section 442? (3) Whether after a winding up order is passed under Section 446 (1) of the Company Act or a provisional liquidator is appointed, whether the Company Court can stay proceedings under the RDB Act, transfer them to itself and also decide questions of liability, execution, and priority under section 446 (2) and (3) read with sections 529, 529A and 530 etc. of the Companies Act or whether these questions are all within the exclusive jurisdiction of the Tribunal? (4) Whether, in case it is decided that the distribution of monies is to be done only by the Tribunal, the provisions of section 73 CPC and sub-section (1) and (2) of section 529, section 530 of the Companies Court also apply apart from section 529A - to the proceedings before the Tribunal under the RDB Act? (5) Whether in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226 or 227 of the Constitution). This is the effect of Sections 17 and 18 of the Act. 22. We hold that the provisions of Sections 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant Bank is concerned. (ii) execution of Certificate by Recovery Officer: Is his jurisdiction exclusive 23. Even in regard to execution , the jurisdiction of the Recovery Officer is Exclusive. Now a procedure has been laid down in the Act for recovery of the debt as per the certificate issued by the Tribunal and this procedure is contained in Chapter V of the Act and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the Banks/Financial institutions should go to the Civil Court or the Company court or some other authority outside the Act for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other court or authority much less the civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point 1 is decided accordingly. 20. Certain provisions in the Companies Act, 1956 came to be inserted simultaneously, namely proviso to sub- section (1) of Section 529, portion of proviso to su b-section (2) of Section 529, Explanation thereto and sub-section (3) of section 529 together with Section 529A as also the w ords subject to provisions of Section 529A found in Section 530, omission of proviso to sub-section (2) of Section 530 and insertion of clause (bb) to sub-section (8) of Sectio n 530 were carried out simultaneously by Companies (Amendment) A ct, 1985 i.e., (Act 35 of 1985). Whereas, sub-section (1 9) of Section 19 of DRT Act came to be introduced by Ordinance i.e., subsequent to insertion of proviso to Section 5 29 and introduction of Section 529A. In this background, Ap ex Court examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Finance Corporation Act, 1951.Section 537 of the Companies Act was applied and it was held that the Companies Act did not yield to the provisions of the State Finance Corporation Act, 1951. There was no provision in the State Finance Corporation Act, 1951 like section 34 which gave overriding effect to its provisions. 50. For the aforesaid reasons, we hold that at the stage of adjudication under section 17 and execution of the certificate under section 25 etc. the provisions of the RDB Act, 1993 confer exclusive jurisdiction in the Tribunal and the Recovery Officer in respect of debts payable to Banks and financial institutions and there can be no interference by the Company Court under Section 442 read with section 537 or under Section 446 of the Companies Act, 1956. In respect of the monies realised under the RDB Act, the question of priorities among the Banks and financial institutions and other creditors can be decided only by the Tribunal under the RDB Act and in accordance with section 19(19) read with section 529A of the Companies Act and in no other manner. The provisions of the RDB Act, 1993 are to the above extent inconsistent with the Provisions of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. It has also been further h eld that in respect of the monies realised under the DRT Act th e question of priorities among the banks and financial institutions can be decided only by the Tribunal in accordance with section 19(19) of DRT Act read with s ection 529A of the Companies Act and in no other manner. I t has also been held that the Companies Act has to yield to DRT Act. 21. Above Judgment of Allahabad Bank s case came up for consideration before a larger Bench of the Apex Court in the case of ANDHRA BANK VS OFFICIAL LIQUIDATOR AND ANR REPORTED IN (2005) 5 SCC 75 in view of the correctness of the statement of law laid down in paragraph 76 of said Judgment (Allahabad Bank s case) came to be doubted. Hence, in Andhra Bank s case the Hon ble Apex Court formulated the following points for its determination. (i) whether the statement of law contained in para 76 of the judgment of this Court in Allahabad Bank does not lay down a good law; (ii) whether the impugned judgment could have been passed by way of an ad hoc measure in view of the fact that the Company was sold as a going concern and the workers dues were to be paid from the sale proceeds of the assets of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, ₹ 135 lakhs vis- -vis the aggregate of the amount of the workmen s dues of ₹ 19 crores and the claim of any other secured creditor was not required to be taken into consideration. We cannot accept the said contention. The illustration appended to clause (c) of sub-section (3) of Section 529 is a clear pointer to the effect that the amount of debts due to the secured creditors should be taken into consideration for the purpose of ascertaining the workmen s portion of security. 25. While determining Point (6), however, a stray observation was made to the effect that the workmen s dues have priority over all other creditors, secured and unsecured because of section 529-A(1)(a). such a question did not arise in the case as Allahabad Bank was indisputably an unsecured creditor. 26. Such an observation was, thus, neither required to be made keeping in view the fact situation obtaining therein nor does it find support from the clear and unambiguous language contained in Section 529-A (1)(a). We have, therefore, no hesitation in holding that finding of this court in Allahabad Bank to the aforementioned extent does not lay down the correct law. 22. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Company Court by order dated 14.06.1994 and undertaking thereunder to pay over the dues of the workman on same being adjudicated by OL to the extent of funds available out of the net sale proceeds of the properties of the company in accordance with Section 529A of the Companies Act. Official Liquidator was directed to take charge of the assets o f the company in liquidation on 18.04.1995. On 21.04.199 5 Official liquidator intimated Rajasthan Financial Co rporation about filing of an application before the Company Co urt for a direction to Rajasthan Financial Corporation and Inves tment Corporation (secured creditors) to deposit ` 25,000/- to meet the expenses for selling the assets of the company ( in liquidation). Said application filed by Rajasthan F inancial Corporation came to be rejected by holding even if the secured creditor stood outside the winding up, their rig ht available under Section 29 of SFC Act has to be exerc ised consistently with the right of the workmen, represented by OL who was a charge holder and ranked pari-passu with th e secured creditors. The Hon ble Apex Court having taken note of Allahabad Bank s case has held that there is no conflict on the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, vis-a-vis the company court arose for decision. This Court held that even where a winding up petition is pending, or a winding up order has been passed against the debtor Company, the adjudication of liability and execution of the certificate in respect of debts payable to banks and financial institutions, are respectively within the exclusive jurisdiction of the Debts Recovery Tribunal and the Recovery Officer under that Act and in such a case, the company court's jurisdiction under Sections 442, 537 and 446 of the Companies Act stood ousted. Hence, no leave of the company court was necessary for initiating proceedings under the Recovery of Debts Act. Even the priorities among various creditors, could be decided only by the Debts Recovery Tribunal in accordance with Section 19(19) of the Recovery of Debts Act read with Section 529-A of the Companies Act and in no other manner. The Court took into account the fact that Recovery of Debts Due to Banks and Financial Institutions Act, 1993 was a legislation subsequent in point of time to the introduction of Section 529A of the Companies Act by Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Allahabad Bank Versus Canara Bank and Anr (supra) was not adverted to in this decision. This decision recognizes that, whether a creditor is standing outside the winding up or not, the distribution of the proceeds has to be in terms of Section 529 of the Companies Act read with Section 529A of that Act in a case where the debtor is a company-in-liquidation. As far as we can see, there is no conflict on the question of the applicability of Section 529A read with Section 529 of the Companies Act to cases where the debtor is a company and is in liquidation. The conflict, if any, is in the view that the Debts Recovery Tribunal could sell the properties of the Company in terms of the Recovery of Debts Act. This view was taken in Allahabad Bank Versus Canara Bank and Anr (supra) in view of Recovery of Debts Act being a subsequent legislation and being a special law would prevail over the general law, the Companies Act. This argument is not available as far as the SFC Act is concerned, since Section 529A was introduced by Act 35 of 1985 and the overriding provision therein would prevail over the SFC Act of 1951 as amended in 1956 and notwithstanding Section 46B of the SFC Act. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fere with the decision of the High Court. We clarify that there is no inconsistency between the decisions in Allahabad Bank Versus Canara Bank and Anr (supra) and in International Coach Builders Limited Vs. Karnataka State Financial Corporation (supra) in respect of the applicability of Sections 529 and 529A of the Companies Act in the matter of distribution among the creditors. The right to sell under the SFC Act or under the Recovery of Debts Act by a creditor coming within those Acts and standing outside the winding up, is different from the distribution of the proceeds of the sale of the security and the distribution in a case where the debtor is a company in the process of being wound up, can only be in terms of Section 529-A read with Section 529 of the Companies Act. After all, the liquidator represents the entire body of creditors and also holds a right on behalf of the workers to have a distribution pari pasu with the secured creditors and the duty for further distribution of the proceeds on the basis of the preferences contained in Section 530 of the Companies Act under the directions of the company court. In other words, the distribution of the sale proceeds under the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt provisions of the Companies Act regarding distribution of the assets of the company-in- liquidation. 19. Now reverting back to the case on hand, we find that the directions issued by the company court are in the interest of all the creditors and are well within its jurisdiction. But we find merit in the submission that the company court was not justified in not ordering a fresh valuation of the properties. Having regard to the lapse of time, we are satisfied that a fresh valuation is necessary. We direct the company court to get a fresh valuation done by a valuer from the panel of valuers of the High Court. The other directions issued by the company court are affirmed. 24. In above referred judgment the Hon ble Apex Court has clarified that there is no inconsistency bet ween the decisions in ALLAHABAD BANK vs CANARA BANK ANOTHER and INTERNATIONAL COACH BUILDERS LTD vs KSFC reported in (2000)4 SCC 406 and 2003 AIR SCW 152 4 respectively in respect of applicability of Sections 529 529A of the Companies Act in the matter of distribution among the creditors. It has been noticed by Hon ble Apex Court in the said case that once winding up proceedings has commenced and liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FC Act will have the power to order sale of the assets of a borrower company-in- liquidation, but only after notice to the Official Liquidator or the liquidator appointed by the Company Court and after hearing him. iii) If a financial corporation acting under Section 29 of the SFC Act seeks to sell or otherwise transfer the assets of a debtor company-in-liquidation, the said power could be exercised by it only after obtaining the appropriate permission from the company court and acting in terms of the directions issued by that court as regards associating the Official Liquidator with the sale, the fixing of the upset price or the reserve price, confirmation of the sale, holding of the sale proceeds and the distribution thereof among the creditors in terms of Section 529A and Section 529 of the Companies Act. iv) In a case where proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or the SFC Act are not set in motion, the concerned creditor is to approach the company court for appropriate directions regarding the realization of its securities consistent with the relevant provisions of the Companies Act regarding distribution of the assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al can sell the 66 property after notice to OL and after hearing him. Find ing recorded by Madras High Court is as under: 41. From the above judgments, following legal principles are settled by the Supreme Courts and the High Courts. 1) A Tribunal acting under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 is entitled to order and to sell the properties of the debtor even if a company in liquidation through its recovery officer, but after notice to the official liquidator or the liquidator appointed by the Company Court and after hearing him. 2) Xxxx 3) No leave of the company Court is necessary for initiating proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (RDB Act) nor can be Company Court transfer to it (or) otherwise interfere with such proceedings. 4) Xxx 5) Xxx 6) Xxx 7) Xxx 8) Xxx 9) When should a company Court grant leave to secured creditor to proceed with the suit against the company after winding up order was made and when should a company Court transfer the dues of such suit during the pendency of winding up proceedings, would depend upon facts and circumstances of each cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pari pasu charge in favour o f the workmen to the extent of their dues and makes the liquidator representative of workmen and he is entitled to enforce such a charge. In conclusion, it has been he ld that once a winding up proceedings has commenced and the liquidator is put in charge of the assets of the comp any being wound up, the distribution of proceeds of sale of th e assets held at the instance of financial institutions comi ng under the Recovery of Debts Act or Financial Corporations co ming under the SFC Act, can only be with the association of the OL and under the supervision of the Company Court. It has been further held that DRT and the District Court entertaining an application under Section 31 of SFC A ct should issue notice to the liquidator before ordering sale of the assets of the company as the OL would be the representative of the creditors in general. 30. As already noticed herein above, the secured creditors in Rajasthan Financial Corporation s case int ended to stand outside the winding up and pursue their remedies available under Section 29 of SFC Act and had sought permission of Company Court to realise the securities and apportion the net sale proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act and it does not provide for the secured creditors to have priority over others. (ix) The secured creditor standing outside the proceedings would not be required to seek the leave of Company Court when the asset of the company (in liquidation) is brought to sale through the aegis of Tribunal or recovery officer as the case may be. (x) The security held by every secured creditor shall be deemed to be subject to a pari-passu charge in favour of the workmen and to the extent of the workmen s dues. (xi) The official liquidator representing the class of workmen is an interested person for ensuring proper price being fetched when the assets of the company is being sold since official liquidator represents the entire body of the creditors and also hold the right on behalf of the workers. (xii) At the time of conducting the sale of the assets of the company in liquidation by the Tribunal or its recovery officer, the official liquidator has to be necessarily associated in such process of sale. (xiii) In the event of the official liquidator being notified, heard and associated in the sale of the asset of the company (in liquidation) by the Tribunal or the recovery offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the proceedings before this Court. This plea can never be accepted, since the procedure normally adopted by this Court is to notify the presentation of the Company Petition before any order of winding up proceedings is passed in atleast one newspaper, which has the largest circulation in the State. The applicant Corporation which has battery of Law Officers working for them, cannot plead ignorance of the pendency of winding up proceedings before this Court. Since this issue is not taken note of by the learned Company Judge, we also do not intend to deliberate on this issue. But, we only observe, that even when you want to offer lame excuse, the same should look atleast reasonable of acceptance. Excuses should not be offered, that too by affidavits, only to sustain their inaction 12. Section 537 of the Act, provides for avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court. The winding up proceedings would commence from the date of presentation of the petition before this court for winding up of the company as envisaged under Section 433 of the Act and other similar provisions under the Act. Once such proceedings are initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n has been passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and unless the Tribunal, on proof of fraud or mistake, thinks fit to direct otherwise, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken. (2). In any other case, the winding up of a company by the Tribunal shall be deemed to commence at the time of the presentation of the petition for the winding up. The intention of relating back the winding up of a company to the date of presentation of the petition for winding up is to avoid dispositions of the property, made after presentation of the petition for winding up. Therefore, when an order of winding up is made, even though the actual process of winding up starts from the date of the order, the winding up of the company is deemed to hav e commenced from the date of filing of the petition fo r winding up, where the order of winding up is made under Section 433(b) to (f) of the Companies Act. Thus, relating b ack the order of winding up to the date of presentation of the petition for winding up, will occur only where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings given herein above and as such further consequential directions are to be issued and accordingly it is issued. 38. In the light of aforesaid discussion, I am of t he considered view that point No.(1) deserves to be answered by holding that Debt Recovery Tribunal by itself or through its recovery officer under the provisions of Debts due to Banks and Financial Institutions Act, 1993 is empowered to sell the asset of a company under liquidation at the instance of secured creditor without leave of the Company Court but associating the Official Liquidator since he is deem ed to have pari-passu charge of the assets under Section 529A of t he Companies Act, 1956. Point No.(2) has to be answered in favour of the official liquidator by declaring that sale of assets of the company in liquidation) made by the R ecovery Officer of Debt Recovery Tribunal at the instance of the secured creditor and consequential certificate of sale issued thereunder in favour of second respondent is liable t o be set aside, with consequential directions. 38. In the result, following order is passed: ORDER (1) Application is hereby allowed. (2) The auction of the property No.67/G in Sy. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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